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A small country between France, Germany, and Belgium, Luxembourg has enjoyed disproportionate influnce as a founding member of the EU.

Independent since 1815, Luxembourg was divided between its larger, northern part, which became part of Belgium, and its southern part, which remained a Grand Duchy in 1915. Officially recognized as a neutral state since 1867, the Grand Duchy was nevertheless occupied by German troops during World Wars I and II. In 1948, it joined a customs union with the Netherlands and Belgium which became the Benelux Customs Union in 1960. It also became an enthusiastic member of the European Community, and of all projects promoting further European integration. This resulted partly from its geographical position at the heart of Europe, and partly from the direct benefit which it derived as one of the three main administrative centres of the European Union, as the seat of the European Court of Justice and the Secretariat of the European Parliament. Luxembourg also benefited from the large-scale presence of banking, and of a modern steel industry.

In 2000 Luxembourg had the world's highest per capita GDP. From 1984, it was governed by a coalition of the Christian Social People's Party and the Social Workers' Party, led by Jacques Santer (b. 1937). In 1995, the latter was succeeded by Jean-Claude Juncker, who from 1999 led a coalition with the Democratic (Liberal) Party. In 2000, Archduke Jean (b. 1921) abdicated in favour of his eldest son, Henri. Two Prime Ministers, Gasthon Torn and Jacques Santer, served as President of the European Commission, while Jean-Claude Juncker became a favourite for the post in 2005, though he declined.